Look on the Bright SideBy Robert Carey
Research by Larry Basinait
Nov-Dec, 2010

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From the highest highs to the lowest lows, there are opportunities within any market. Our hot-markets data shows which industries are surging and what chances await.

When distributors set their sights on education, it’s not schools they see so much as banks, since the education market continues to represent an unyielding source of sales. “The biggest upward trend the past few years has been in the educational market,” says Jerry Scher, vice president of The Roe Company (asi/309700) in Englewood, NJ. While Scher’s client base is diversified across industries, he finds that education thrives regardless of the circumstances. Says Scher: “Schools might buy a little less quantity or use items that are a little less expensive than we saw in the past, but apparel is a central category to this niche regardless of economic conditions.”

Actually, education isn’t totally immune to economic realities. Some negative changes include: grade-school budgets being squeezed as many districts operate under voter-mandated austerity plans; university administrators reducing purchases to safeguard against shrinking endowments; and government funding of universities becoming less robust as legislatures address large budget deficits.

On the other hand, Laura Ransbottom, president of P-F Unlimited (asi/288860) in Tulsa, OK, finds that some of these measures have actually resulted in opportunities. “My reps are seeing more school-spirit stores in the schools, and even initiatives for clubs that typically did not have their own apparel – the chess club, etc.,” she says. “All the extracurricular groups are more proactive with spiritwear because so many have to fund their own activities now.”

Apparel quality is important (but not overly important) when it comes to the education market. “The items they use are not top-shelf, mostly T-shirts and polos that are one or two levels above the most inexpensive options,” says William Goforth, CEO of Pine State Enterprises (asi/295970) in Berkley, MI. But even if their tastes aren’t overly exotic, “They are still buying the standard stuff, and this niche is keeping my business moving along,” says Brad Akers, owner of Tip-Top Branding (asi/344851) in Chicago, who has several smaller universities as clients. “I see no signs of them pulling back.”

Accordingly, to drive interest and raise margins, distributors should concentrate on trendy cuts and unique decoration. “The variety of decoration is what is driving sales of many items,” Ransbottom says. “So the most important thing is the availability of different styles and decorations.”

Here are some other tips on selling to the education market.

Think small. Akers continues to find success with smaller universities because they typically do not invest their endowments as aggressively as many larger schools do. As a result, the stock-market turmoil of the past three years likely hasn’t affected their finances as greatly.

Grade-school cool. Distributors like Goforth and Vickie Jackson, president of ProMotivators Inc. (asi/301452) in Alisa Viejo, CA, have typically eschewed grade-school-level clubs and fundraisers because of their low volumes, but they are beginning to change their tunes. “I guess you have to go where the business is,” Jackson says, “so I am moving more in that direction – and I have landed a lot of school-related fundraising work lately.”

Team first. Athletic squads always need apparel, and John Furnish, vice president of business development for The Promotional Specialists (asi/301163) in Markham, Ontario, continues to see good momentum in this niche, with everything from woven shirts and high-quality jackets for coaches and booster clubs to travel bags and hats. He finds there’s even demand from the central offices of the larger youth hockey and soccer associations he serves. “One year ago, this stuff was not moving like this,” Furnish observes. “Maybe people are finally feeling comfortable enough to make these purchases again.”

Narrow your product options. For distributors who want to tap into education, but not get overwhelmed, Jackson advises presenting a solid but narrowed range of ideas to keep it targeted. “Don’t give every prospect in this niche a whole new set of products to choose from,” she says. “They don’t need differentiation to the level that corporations do.”

Money in the Middle

Distributors continue to preach the merits of a diversified client base, and not every business can specialize in major markets like education or associations for a simple reason: The competition is cutthroat.

The good news is that the markets in the “Broad Middle” – manufacturing, nonprofits, health care, retail and restaurant/travel/lodging – have been sitting on cash and waiting for the first hints of a sustainable economic turnaround. They’re getting close to unleashing what could be a considerable amount of money directed at marketing initiatives throughout 2011.

In fact, some distributor firms already see clients making such a move, like Stolz Mead Global (asi/337115) in Columbus, OH. “These firms had a fantastic 2010 and are taking advantage of that momentum,” says Co-Owner Robert Knable, who counts several consumer products companies among his biggest customers. While some gravitate toward lower-cost items like T-shirts, innovative decoration will continue to lure them. “The all-over printing has become much easier to do, giving us more opportunities with these types of clients,” Goforth says.

And don’t discount the push for companies to attend more trade shows. “Business seems to have finally turned the corner; it’s on the upswing right now,” adds Goforth, whose distributorship deals with a slew of manufacturing reps. “They are doing more dress shirts for the showroom, and for the trade shows they’re attending again.” One of Furnish’s clients recently ordered dress shirts in two colors as well as a quarter-zip pullover for the first time. “We’re even seeing an uptick in woven shirts,” he adds. “I don’t really know why, but just about every client has asked for some.”

Jackson sees similar growth at Pro Motivators, which gains much of its work through ad agencies. “Things are picking up a lot this year,” she says. “The marketing budgets for high-tech, consumer tech, entertainment and other segments are getting the green light again, and the fashionable brands like Ogio, Nike and American Apparel are what move here in California.” Brand names continue to move the needle for corporate clients, especially on the restaurant and retail-storefront segments, which use them for internal use as well as client gifts.

But make no mistake: Sectors like manufacturing and retail have been hit hard and could use all the help they can get. Distributors can work their way in by acting as a full-service provider. “We no longer simply procure product,” Knable says. “We sell graphic design and concept, too, so that we can take a client from A to Z on a project. Companies used to have five or six people working on these things, but that’s been cut back to one or two people. So it makes sense for us to take on as much as we can.”

Virginia Piendak, CEO of The Richey Company (asi/308200) in Carrollton, TX, has shifted the firm’s focus in order to get more total business from each client in this segment. “Because of what happened over the past few years, clients have more complex needs, and we’ve had to evolve so that our services resonate with them,” she says. “We’re moving into dimensional promotions, we’re helping sales forces more, we’re offering strategic capabilities rather than being seen only as a promotional firm that does fulfillment. We have to be a wide-ranging, solutions-based business.”

Here are some other trends occurring in these sectors.

Out with the unisex. Ransbottom has witnessed a push for women’s-specific clothing in everything from special events and entertainment to the conference and trade-show circuit. “We have gotten more requests for women’s cuts in the past 18 months,” she says, pointing out that “trade shows for nonprofit and trade associations have a lot of women attendees.”

Colors. “Women want things that are resilient and easy to care for,” Ransbottom says, “but they don’t want to do navy and gray all the time. They’re looking to pick up some color, be a little more bright and stand out a bit.”

Upselling. Many distributors have convinced clients to move from performance shirts and polos to performance outerwear. Knable has gotten a few clients to “go more upscale with jackets; Columbia is a popular choice.” Adds Furnish: “We had seen a lot of people trade down in their per-unit purchases, but that is turning around, and we’ve had a big bump in outerwear that we didn’t anticipate.”

Opportunities Arise

While these markets constitute a small portion of a distributor’s business, these wearables-lean segments do offer potential for opportunistic businesses. Here are some market-specific tips.

Financial. Despite the beating that the financial and banking sector has taken in the public eye, it has emerged as a resurgent dark horse. Dick Bove, an analyst at Rochdale Securities, told CNBC viewers in late August to expect “an explosion in bank acquisitions” in late 2010 and into 2011. That’s when the minimum-capital rules are supposed to be set, and banks that can’t meet the standards will be ripe for takeover. What does this mean for distributors? Lots of goods will be needed to fulfill big rebranding efforts, right down to the local branches. “We lost a banking client last year,” Akers says, “but they came back to us under a different name, so they needed all new items.”

Jackson suffered some harsh losses with the reorganization and rebranding of Countrywide Financial. “But I have a lot of contacts in finance who have moved around the industry, and I will just follow my contacts,” she says. “I have done business for 20 years mostly by referrals, so people who moved on or were even laid off have found a new company, and some of them are already calling me.”

Pharma. In the pharmaceutical industry, the rules governing promotional items have created challenges for distributors. But pharma-focused distributors such as Scher manage to find rays of light. “We are still dealing in apparel with these firms, from the standpoint of internal usage as opposed to promotional purposes,” Scher says about The Roe Company’s clients. “They do run a lot of meetings and events for their own people, both training and recognition events, and clothing has always been a staple for those. They use the better-quality polo shirts and jackets, and brand names like Nike and Cutter & Buck.”

Construction. Clearly, the new-construction market is quite weak, given the state of both the residential and commercial real-estate markets. Even home-improvement business is down because consumers are no longer borrowing against the value of their properties to finance projects. But James Waskey, sales manager for AdForm (asi/104977) in Baltimore, says that “as bad as 2009 was in this segment, we’ve seen it coming back somewhat this year. It won’t get to 2008 levels for another year at least, but that does not mean there’s no business out there. Construction firms go through clothing pretty quickly.” Their preferred items include sweatshirts and resilient outerwear in colder months; in summer, T-shirts are needed for employees and for promotions, plus polo shirts for management.

Real estate. While the residential real estate market seems to have bottomed out, the commercial market is in a precarious position right now. Executives at The LeFrak Organization, one of the biggest real estate industry players, predicted in late August that the other shoe has yet to drop. This will hurt not only construction firms but also realtors, as defaults rise again and space remains vacant. “I think that there were a lot of firms that squeaked past foreclosure the first time around, but they can’t hang on for the length of this recession and will have to default,” Waskey says. On the other hand, Knable has found a few companies in this niche that actually get busier as things turn sour. “We picked up a firm that specializes in managing bank-foreclosed properties across the country, and we are acting as a one-stop shop for them,” he says. “We are doing a few things for them that we had not done for anybody in the past, so it’s been good for us.”

Utilities. The energy niche is rather interesting these days, as the increasing diversity of fuel sources creates a myriad of opportunities depending on your region of the country. “Natural gas is big business here,” says Ransbottom about the Tulsa region, “but lately the interest in wind energy has been picking up a lot more, too.” A huge natural-gas find across Pennsylvania and New York last year could mean an increased need for apparel for energy-firm workers going into that area, while distributors in coastal regions should keep tabs on wind-turbine projects being developed in their area.

Government. The good news with the government is that it was set to spend an additional $787 billion in recovery funds in 2010, with the goal of awarding 23% of it to small businesses. However, the slight bump you may have received from the government may take a hit with the end of the federal government’s stimulus. Plus, the increased attention paid to deficits on state and municipal levels likely means that apparel will not be high on the purchasing lists of those who have used it in the past. Seek out high-profile initiatives that are announced in the news or elsewhere, but beware that the purse strings may be a little tighter.

C.J. Mittica is editor, Robert Carey is a contributing writer and Daniel Walsh is a staff writer for Wearables.

Promotional products, also known as ad specialties, make up a $20.5 billion dollar industry and are used by virtually every business in America. Why? Items like mugs, pens and t-shirts are memorable and provide a better cost per impression for advertisers than almost every major marketing effort like prime time TV, magazines and radio.

With so many businesses buying ad specialties there is a huge opportunity for professionals looking to make great money running a promotional products distributorship. It’s easy and inexpensive to get started and you can work from home.

Making You Money: What ASI is all about.

Promotional products, also known as ad specialties, make up a $20.5 billion dollar industry and are used by virtually every business in America. Why? Items like mugs, pens and t-shirts are memorable and provide a better cost per impression for advertisers than almost every major marketing effort like prime time TV, magazines and radio.

With so many businesses buying ad specialties there is a huge opportunity for professionals looking to make great money running a promotional products distributorship. It’s easy and inexpensive to get started and you can work from home.